$872 Million Investment by BMW Will Go Towards Manufacturing Electric Vehicles in Mexico

In Friday's announcement, BMW said it plans to invest €800 million to boost the production of electric vehicles in Mexico, despite the fact that US subsidies will benefit Mexico, despite the fact that tensions over the US subsidies are escalating between Europe and the United States.

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In addition to the €500m investment in lithium-ion batteries, the BMW car plant in San Luis Potos will host a lithium-ion battery assembly center. In addition, the plant will be prepared for EV production with the remaining funds. There will be 1,000 jobs created as a result of the investment, according to BMW.

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Following last year's passage of the US Inflation Reduction Act, this is one of the largest clean energy investments in North America. 

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According to Trade Algo, since the legislation was signed by US President Joe Biden, at least $34 billion has been announced to develop the country's entire EV distribution network, highlighting the region's advantageous position to profit from the energy revolution and initiatives to offload production processes from China.

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As a result of the $469 billion in green subsidies, a tense diplomatic row has erupted with Europe, which says they violate the World Trade Organization rules and could unfairly deter investment.

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During the investment considerations, BMW said that the plant had been planned prior to the IRA. Despite that, the announcement by the German company, as well as Brussels' announcement of a rival incentive plan, adds fuel to American criticism that EU industry is being disadvantageous.

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Furthermore, BMW said it would benefit from the labour force and lithium supply available in Mexico as well as its proximity to the US market. 

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Mexico's authorities and the company are in an open dialogue regarding the rules and requirements for cars manufactured there to receive these benefits, according to the statement. 

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Recently, US, Mexican and Canadian leaders met in Mexico City to commit to turning the region into a powerhouse for clean energy. 

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Mexico and Canada received EV final assembly tax credits while European allies were excluded from the IRA's green subsidies. The US Treasury has yet to announce guidance regarding battery subsidies for countries with free trade agreements with the US.

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 A trade agreement removing most trade restrictions between the US and Canada gave Mexico's auto industry a competitive edge under the North American Free Trade Agreement. Ford, Toyota, Volkswagen, and nearly all other major automakers have well-established operations in Mexico, the world's largest exporter of auto parts.

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The Mexican government has approved the opening of new electric vehicles plants or increasing EV production by a few companies. An electric Mustang is being constructed at Ford's plant in Cuautitlán. Ramos Arizpe, General Motors' only plant producing internal combustion engines, will produce two EV models. As soon as the second half of the decade approaches, Volkswagen plans to upgrade its Mexican plants for electric vehicles.

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While the company has not confirmed any final decisions, Tesla is searching sites in Mexico for its next EV plant. No comment was received from Tesla.

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An investor-friendly energy policy would attract more investors to Mexico, say top trade and industry leaders.

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Earlier this year, President Andrés Manuel López Obrador changed many electricity market rules to favor private, zero-carbon renewables over those produced by the state utility. Herrington calls the country's energy policy "the single biggest risk" to EV and battery investments. 

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According to industry data provider LMC Automotive and Argonne National Laboratory, the US has 10 times the EV assembly capacity of Mexico. In the days following the passage of the IRA, TradeAlgo tracked $715 million in new investments in the EV supply chain in Mexico, compared to $32.5 billion in the US or an unspecified location in North America.

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It is only possible to receive certain subsidies in the IRA if you manufacture in the US. AMIA executive president José Guillermo Zozaya Délano said Mexico should offer its own incentives to attract investments.